Hong Kong's SFC issued two circulars on 4 July 2014 to issuers of SFC-authorised funds regarding new disclosure requirements for Key Fact Statements (KFS) and websites.
Disclosure of ongoing charges and past performance information
The first circular sets out new disclosure requirements relating to the figures for ongoing charges in the KFS, and past performance information in both the KFS and website (where available). To allow a fair and meaningful comparison, the SFC requires that the yearly ongoing charges figure and the past calendar year performance information be disclosed in a prescribed format. These enhanced disclosure requirements are in line with those of the European UCITS regime.
The circular provides detailed guidance on calculation methodologies and presentation format, and also permits the use of a "representative share class" for disclosure of performance information. Issuers can refer to the circular and KFS templates on the SFC's website for details. For a newly established fund, the issuer should provide an estimate of the ongoing charges figure in the KFS and review the information no later than 12 months after the fund is offered for sale. If performance fees are charged, the KFS should include both an ongoing charges figure incorporating these fees and another figure excluding these fees.
The ongoing charges figure and the past performance information (including performance information on any website) should be updated annually based on year-end information and the updated KFS should be issued (and website updated) before end of April of the following year. It is the obligation of the management company to review the ongoing charges figure. If any material change or significant event occurs, the management company should assess if the published information should be updated.
For existing authorised funds, the deadline for compliance with the new requirements is 3 January 2015. Authorised funds which are no longer marketed to the public in Hong Kong may provide the relevant information to investors upon request. All new fund applications which have not been authorised by the SFC as at 4 July 2014 must comply with the new disclosure requirements, unless the applicants provide an undertaking to the SFC that they will comply with the KFS disclosure requirements within a month of the application. Such undertaking approach is applicable to all new fund applications that are submitted to the SFC prior to 11 August 2014.
Disclosure of tracking difference and tracking error information
The second circular provides guidance on new disclosure requirements for SFC-authorised exchange traded funds (ETFs) relating to tracking difference and tracking error information. For SFC-authorised unlisted index funds, only requirements concerning disclosure of tracking difference, to the extent they relate to the KFS, are applicable. A detailed circular and illustrative examples are available on the SFC's website.
The deadline for compliance is 3 January 2015 for SFC-authorised ETFs and unlisted index funds and for new fund applications submitted to the SFC prior to 4 July 2014.